Good morning, everyone, and thank you for joining us on the call today. We appreciate your time and interest in Raymond James Financial. With us today are Paul Reilly, Chairman and Chief Executive Officer; and Paul Shoukry, Chief Financial Officer. The presentation being reviewed this morning is available on Raymond James Investor Relations website. Following their prepared remarks the operator will open the line for questions. Please note certain statements made during this call may constitute forward looking statements. Forward-looking statements include but are not limited to, information concerning future strategic objectives, business prospects, financial results, anticipated results of litigation and regulatory development, impacts of the COVID-19 pandemic or general economic conditions. In addition, words such as believes, expects, could and would as well as any other statements that necessarily depend on future events are intended to identify forward looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in the forward looking statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q, which are available on our Investor Relations website. During today's call we will also use certain non-GAAP financial measures to provide information pertinent to our management view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedule accompanying our press release and presentation. With that I am happy to turn the call over to Paul Reilly, Chairman and CEO of Raymond James Financial.

Good morning, and thank you for joining us today. Before we begin, I just want to note that our thoughts occur with all of those that impacted both directly and indirectly by the COVID-19 virus. This has been a difficult time for all of us and we certainly hope you and all your families are doing well. The financial services industry has certainly had its ups and downs reputationally over the many years. But I can tell you today I am proud of our industry. Even through this pandemic time where we're focused on getting associates at home, we help keep the markets opened. The industry has helped with the administration of the Government programs and helping businesses and people gets much needed cash. We have shared best practices on protecting employees and associates and everyone connected to the crisis was just trying to help during this national emergency. And furthermore, I think the government especially the treasury and Federal Reserve has been unbelievable as being open to support the markets in this very difficult time and to reach out to make sure that the programs really worked. Values are critical during good times, but they are the guiding light in times of crisis. As we navigated through this crisis our top priority was clear, the health and safety of our associates and advisors as well as our clients. We've treated and followed every case in the RJ family to make sure that our associates and their families were well equipped to handle the impact. We quickly transition nearly 95% of our associates to working remotely and closed all employee branches, while providing continuous service to our clients. We've also taken the additional steps to support our associates, particularly those who were directly impacted by COVID-19. With 14 days of…

Thanks, Paul. And I'm being told that whole opening for a few minutes was missed because the operator forgot to switch us over to the overall lines. So I'll maybe ask Paul to repeat his industry remarks and the outlook. Starting with revenues on slide 13, as Paul stated we generated record quarterly net revenues of $2.07 billion, which were up 11% on a year-over-year basis and 3% sequentially. Asset management fees were up 28% on a year-over-year basis and 5% sequentially. PCG assets and fee based accounts declined 14% during the fiscal second quarter which will be reflected in the third quarter as these assets are billed at the beginning of each quarter, based on balances at the end of the preceding quarter. Brokerage revenues during the quarter of $515 million were strong, as there was a surge in trading activity in both private client group and the capital markets segment in March. Account and service fees of $172 million declined 10% on a year-over-year basis and 3% sequentially, primarily reflecting the decrease in RJBDP fees from third party banks due to lower short term interest rates. Paul already discussed investment banking results and I'll discuss net interest income on the next two slides, but quickly on other revenues, which were down substantially this quarter, reflecting valuation losses associated with our private equity investments in the fiscal second quarter of $39 million. And as you will see on the upcoming expense detail slide, $22 million of the valuation loss is attributable to non-controlling interest and is presented as an offset in other expense. So the net impact of pre-tax income and valuation losses associated with the private equity investments was $17 million for the quarter, representing close to a 20% decline in those valuations. The remaining value of these…

Yes. I don't know if it's worth going through the opening again. I know here, they weren't cut in or just should we skip it. And for those who didn't hear the forward statement, I know you can find it in our website you know finding the way. So thanks, Paul. I want to reiterate that first our primary priority our number one priority is to ensure the health and safety of our associates, advisors and clients. While conditions may appear to have improved in some parts of the world, we must be mindful, we're still in the middle of the global health crisis. Since we're working from home arrangements worked so well, we continue to provide excellent service to our clients. We have 95% of our associates are working from home, and we've had no technology disruptions. So we've been able to service the work from home, which is a testament to our associates and their focus on client service, and we're going to be very slow and deliberate about bringing associates back into the office. And when we believe that conditions are safe, we will slowly move them in a phased cautious manner. For our near term outlook, similar to the rest of the economy, I think you should expect significant near term headwinds for our business. In the private client groups segment, while our financial advisors recruiting pipelines remain strong, and we have ramped up virtual recruiting and on-boarding activities. Traditional recruiting efforts will be impacted by the travel restrictions and even the comfort levels of in-person meetings. The near-term impact on recruiting results is uncertain, but it seems likely that even with the strong pipeline, there will be delays, and they will be disrupted until restrictions are lifted and people feel comfortable traveling and in meeting…

[Operator Instructions] The first question comes from the line of Steven Chubak from Wolfe Research. Your line is now open. Please ask your question.

Hey, good morning, Paul. Paul, I hope both you guys are doing well. Just I appreciated some of the clarifying remarks on expense, and you noted higher credit costs were the primary culprit of elevated non-comps versus expectations. I guess taking a step back on recent calls you've talked about efforts to bend the cost curve slow the pace of non-comp growth. We started to see some early signs of that in recent quarters. But even when I back out the higher provision and the NCI noise, it looks like core revenues were up about 5%, non-comps were up 7% sequentially. So I'm just trying to understand how much of the non-comp inflation, was may be one-time in nature? And then with revenue slated to contract from here just given the COVID pressures you cited, how should we think about the pace of non-comp growth in a contracting revenue environment?

Yes, Steve, as you may recall from last quarter, the non-compensation number that you are facing, the sequential growth on last quarter of $299 million was kind of seasonally low. And so we guided for the year to about $1.3 billion or $325 million per quarter, which would have been an increase of somewhere around in the low single digits on apples-to-apples basis on an annual basis. So everyone was sort of looking at that $325 million this quarter. And again, even with those two items you've mentioned, we would have been lower than that for the quarter. Now again, a lot of that is due to some of the conferences and travel - we really had a conference or institutional conference. We still had in early March before the COVID crisis really broke out, but we did obviously travel expenses did decrease as March progressed and the COVID shelter in place orders went into place. And some of that was offset by purchasing laptops et cetera. So I would tell you that the non-comp expenses, excluding the provisions came in in terms of the various line items where we would have expected and where we talked about last quarter. Now with that being said, as we progress from here, the dynamics will shift a little bit as travel and conferences. We've canceled a lot of the conferences, the two big private client group conferences this year. So that dynamic will shift from here. And then in terms of any further actions on costs beyond that, people and the compensation being our biggest costs, it's really during the crisis, is not when you make those types of changes. So we need more clarity and stability before we make broader changes in that.

Thanks. Very helpful color on that Paul. Just one for me on credit and the provision outlook, relative to a lot of your bank comps, you actually built, help your level of provision despite having arguably lower exposure to the higher risk industry categories. Now how should we think about the pace of provision build over the course of this year? You subtly alluded to GFC stress as maybe being the right paradigm here for thinking about loan loss reserve levels, should we refer that if COVID stress continues to negatively impact economic growth that we should be contemplating similar build toward 2% plus or how should we really frame that as we think about the trajectory over the remainder of this year?

Yes. Obviously, there's a lot of uncertainty going forward, as you've heard from all the other banks. And when you look at that allowance for loan loss, which for us is about 1.5%, and you compared to other banks, you really have to look at the various loan categories. We don't have a credit card portfolio. For example some of the banks put allowances of 8% to 10% on those types of portfolios. But within our corporate and CRE portfolio, around 2.4% allowance for loan losses, which we believe and based on what we're seeing in the industry is a healthy number. And so but going forward as healthy as we think that is, it could get worse from here if the economic conditions continue to deteriorate.

All right. Just one quick clarifying question, Paul, I believe that you indicated that the third party suite program is yielding about 30 bps. I was just hoping you could speak to how these agreements are structured, given a lot of banks are flush with cash, given client derisking and aggressive QE. I'm just wondering if the banks start to have less appetite for deposits or if you're sensing that at all? And how that might impact the pricing on some of these agreements?

I'll tell you early on, the last month or so we've actually seen just the opposite. The demand from the banks and even some of the biggest banks in the country has been very strong. I think some of that is somewhat related to the significant level of revolver fundings over the last month. And so we've added significant capacity with third party banks at attractive rates. They're typically one or two year type agreements. And for us as of right now the floating rate agreements that are based on Fed funds target or Fed funds effective.

Great. Thanks so much for taking my question.

Next question comes from the line of Chris Harris from Wells Fargo. Your line is now open. Please ask your question.

Thanks guys. Another one on the provision, I appreciate there's a lot of uncertainty, but can you talk to us a bit about the potential ramifications or impacts to you from the implementation of CECL in October?

Yes. I guess, it's too early to tell. We're building out all the models. And even when we run sort of parallel runs now with the model that we have, there's pretty significant variations, especially since the COVID crisis. And what macroeconomic scenarios we could use, we would probably air on using some of the more conservative scenarios. But again, too early to tell. And by the time we implemented on October 1, conditions and assumptions are going to be a lot different. So even for the banks that have already implemented, CECL, what we're hearing on from peers and other earnings calls is that there's a lot of uncertainty and variability with the assumptions that they're using.

Okay. And I know you guys are sweeping a lot of deposits to third party banks. But what is your appetite to grow the securities portfolio in this type of an environment with where yields are today?

Yes. As we said on the last few calls, we have a target to grow the securities portfolio to $6 billion by the end of the fiscal year. We actually ended the quarter at just over $4 billion. But that would represent a 50% increase, which is a significant increase for the rest of the fiscal year. And we'll probably get to the $6 billion at the current pace, maybe a few weeks before the end of the fiscal year. But obviously, a lot can change between now and then. In terms of the incremental balances that came in in the last four weeks. We're taking them off-balance sheet now just to provide as much flexibility as possible. We wouldn't want to make a big change in our balance sheet strategy in the middle of the global pandemic. And certainly not with that all the cash that just came in, in the last three to four weeks. So we are open to it. Last time we're in a zero rate environment. We didn't have a securities portfolio or agency mortgage backed securities portfolio at all. Now we do and we have a lot of expertise. We actually use our in house team, a strategic investment management services team to help us with it. So we feel really good about our securities portfolio. And as the cash balances remain resilient as we get through the $6 billion, if it still makes sense for us and for shareholders, we will certainly consider growing it even beyond that.

Okay, thank you.

Next question comes from the line of Devin Ryan from JMP Securities. Your line is now open. Please ask your question.

I guess first question just on the NIM guidance in the bank. I appreciate the color there. That's roughly what we were expecting in terms of the progression. As we think about kind of beyond the next couple of quarters, do you see that moving lower if you're further from there, just based on the current rate curve or how should we think about that? Is it 2.5% kind of where effectively in that range it bottoms out or are there other kind of puts and takes that would affect if we were to kind of run this out a little further in the next year or two?

Yes. I mean, obviously, there's going to be a lot of variables there in terms of how the asset growth and which categories that asset growth comes from over the next year or two. So as best as we can tell right now, 2.5%, give or take obviously, LIBOR moved 20 basis points just in the last seven days. So there's a lot of volatility even in the base rate. But I think based on what we know that now, that's about as far as we're willing to guide.

Okay. Fair enough. And then a follow-up here just on you talked a little bit about M&A and the opportunities that can come about as a result of dislocation. And as I just thinking about tying that into the technology investment that the firm has made in recent years and kind of how that differentiates you or when you've been thinking about talking to financial advisors and recruiting and just in this work from home environment? How much more important technology is today probably than ever before? How is that playing into kind of the offering to advisors as you are doing these virtual recruiting sessions with them? And just kind of essentially presenting the platform to them? And then in terms of like the M&A consolidation opportunity, is that maybe one of the drivers here where some of the firms that are small or maybe under invested and we're seeing that technology is going to be probably a lot more important than even anyone thought six months ago or a year ago. So just love some thoughts on that, both how it applies to both recruiting and M&A as well?

So from recruiting, Steve I am sorry, Devin, that it's early. We've had a few, what I call telerecruiting sessions that have worked. We our commitment backlog is good, but joining dates have split. People don't want to go in and open an office right now, in most cases, although we've had some virtual openings. So it's early to tell really what that impact is going to be in terms of recruiting. There is nothing like a face-to-face, meaning, especially when many people are joining us for a value proposition. And to really see the technology demonstrated live with people, that's much more impactful. So I think getting in front of people will be the key to resuming recruiting at the kind of the paces we have. And so my guess is it will be disrupted in terms of for the financial services entries for advisors, most firms did fairly well in terms of work from home. Their technology may not have been as noble, but they've been able to do that. And financially, self-clearing firms probably struggled without a lot if they didn't have a lot of capital in the first week or two, but that's settled down too. So I think it's going to be a little bit longer term where people have to see that strategically as we recruit because of our systems. I think firms are going to have to say, you know what, we're just too far behind between regulatory and recruiting and technology that we need to go somewhere else. So I would not expect in the private client group space any rapid movement, and we wish those firms well. They're friendly firms to us, but hopefully, someday, if they make that decision, they'll join us. I think there's probably more opportunity, if this crisis if there's a slow return in M&A. We've had discussions in the investment banking and the M&A space for a while now and pricing tended to be the issue, and we'll see what happens to pricing if this brags out. I think people will get more interested. If it's short-term and M&A bounces back, then I think there'll be less opportunities. So we're very actively keeping up the dialogue, and we're just going to have to see, again, just like the crisis, it's too early to tell, a slow recovery, will need more probably reserves and a slower market and but maybe more M&A opportunity and a faster recovery may make the loan portfolio much more robust and the market goes up, but maybe M&A opportunities won't be as available. So it's just too hard to tell. It seems like forever, but we're six weeks in, really. So it's being at home, it's you count the days a little they seem a little slower, but it hasn't been a lot of time than where we are in this pandemic so far.

Well thanks, I appreciate it. I'll leave it there. Thanks for taking my questions.

Next question comes from the line of Craig Siegenthaler from Credit Suisse. Your line is now open. Please ask your question.

Good morning. This is Gautam Sawant stepping in for Craig. A question, what drove the decision to raise an additional $500 million? And how do you feel about your liquidity and capital position with $2 billion of cash at the parent level?

So what drove it was honestly, we debated with about $1.5 million of cash revolver that's secured and committed by we bank some of the biggest and healthiest financial institutions. So we really need cash. And the first answer was probably not, but we decided I've never seen a firm go broke because they had too much cash or a firm that has that couldn't execute an opportunity because they had too much cash. So we looked at the pros and cons and decided that our extreme capital levels that we've had are an asset to us, and we wouldn't have to cut the debt. So now we're $2 billion in cash and a $0.5 billion undrawn line of credit. So we feel we did it. If this crisis is more severe than we imagine, we'll still be fine. Multiples of the cash and capital that we had going into the '09 crisis, '08, '09, if there's an acquisition opportunity, we are ready to go. Part of our Morgan Keegan acquisition happened because we were able to execute, both with our cash on hand and a committed in an overnight committed volume that a bank gave us to execute very quickly at a time or where it was very uncertain it could execute. So again, we felt being liquid was probably more important than the extra interest cost. So we went ahead and to the bond offering.

Thank you.

Next question comes from the line of Alex Blostein from Goldman Sachs. Your line is now open. Please ask your question.

Great, thanks, good morning guys. Couple of questions, so I guess just going back to credit dynamics and the provision in the quarter. Can you help us understand, I guess, some of the macro inputs that you considered, whether it's GDP growth or something that we can help sensitize to what degree, if we see further deterioration in the portfolio or in that economy? We could see additional reserve builds. So kind of what's the baseline assumption? And any sensitivity around additional deterioration?

So Alex, we don't implement CECL until October 1. So it's not so formulaic for us yet because we have a September 30 fiscal year end. So our CECL implementation starts at the beginning of our next fiscal year. So it's not quite as formulaic. We're still under the incurred loss model, where we're really trying to go loan-by-loan and do make the decision on a bottoms up basis.

And those reserves were generated mainly on the industries that we thought the sectors that were very COVID affected. So that's where most of that all that reserving CAD.

Got you. And then I guess unrelated just back to the conversation around expenses and comp. Appreciate your comments around the comp rate, obviously being skewed this quarter by the private equity dynamics. That's pretty clear. But I guess if you look at some of the segments, the comp rate and capital markets specifically picked up pretty materially at around 63% in the quarter. So I guess maybe you would drove that and then taking a step back, can you help us think about what the comp rate for the firm should look like for the rest of the year?

Yes. Within the capital markets segment, that comp ratio was negatively impacted this quarter by revenue mix. We don't break it out anymore after revenue recognition changes last year, but we did have some trading losses on inventories in the capital markets segment, where there's not the same direct compensation associated with those trading losses as we have with the significant growth in commissions we had in the segment during the quarter. And of course, on a year-over-year basis, M&A was down significantly from a very strong year ago quarter. So it's really attributable to the revenue mix and particularly the trading losses on the inventories. In aggregate though, just kind of stepping back in to your overall question, obviously, there's going to be negative pressure or upward pressure on the comp ratio just due to lower interest rates and the negative impact that lower interest rates has on non-compensable revenues. The net interest income and RJBDP from third party banks is going to be down based on the guidance that we just provided, and those don't have direct compensation associated with it. So you can look back before the 2015 period in a zero rate environment, obviously, that puts upward pressure on our comp ratio. But we're not because of all the volatility with the other line items and the impact of revenue mix, we're not in a position now to provide a new target for that?

I think, too, it's important to note that those trading losses, so a lot of them were generated by fixed income. We in our unique kind of balance sheet, one of our strongest sectors has been in the nontaxable muni finance. And even though that portfolio was almost entirely investment grade. In '09 those securities traded well. In this downturn, they did not. So we went ahead and lower those. I think we have the lowest inventory we've ever had. And fixed income right now. When we went ahead and sold them out, and that generated some trading losses, but it left us very liquid and nimble.

Got it. Okay that makes sense. Can I just clear one more around just the capital return dynamics and the balance sheet management? So obviously, nice to see you guys do a successful debt offering, but just given the significant amount of liquidity on the balance sheet, can you give us some thoughts around rationale behind going out and raising long term debt today? For in your refi activity, or anything else we should be thinking about there?

I think if you look at our capital, one of our clear message is we have a lot more capital and cash. Even today, we're very unlevered compared to most of our competitors. So one of the challenges we had, even if the world continued and we're buying back stock, we would've had to raise that for liquidity or if we did an acquisition, we would have to raise debt or equity for liquidity. So I think what you see is us just being a little more aggressive in getting our cash liquidity more in line with our capital so that we have flexibility. And we felt that the market has recovered and is starting to do better, but we've also seen periods where the market wasn't open for periods of time and felt that even at that cost, it was a good trade-off to have more liquidity, more in keeping with the capital we have to give us flexibility, whether we end up doing an acquisition or buying back shares eventually or we have the cash to be able to execute on that.

Great, thanks for taking all the question.

Thanks Alex.

Last question comes from the line of Bill Katz from Citi. Your line is now open. Please ask your question.

This is actually Lorie [ph] dialing in for Bill Katz. So just have questions around capital market. I'm wondering what are the current equity and fixed income sell-side trends into April? And what would be the key factor to get M&A going again?

I think for M&A and capital markets, it's just a confidence where the economy is going. So surprisingly [indiscernible] pulls a bit, backlog has been very resilient. And people are still talking or waiting. I think if you see in the economic recovery start to happen that M&A transactions will pick up. If you see a very slow recovery or a recurrence of the virus, you're going to see M&A activity really fall off. So, again it's very economic dependent and in fixed income I think it we did very well. We did have trading losses as I described later, but the volume and the profitability of that segment has been good. Certainly, March from a commission basis was outsized. Outsized for everybody with the increased volatility, but even as volatility settled down, we still have reasonably good volumes in our fixed income trading sales business. So I'm feeling pretty good about that sector.

Thank you so much.

No further questions, please continue.

Great. Sorry if you missed the opening. But we hope and we think about all of everyone affected by COVID directly and indirectly as we're recognized that us and our industry is able to work from home that we're really blessed because other people don't have their jobs right now, and we certainly hope you and your families are doing well. So thank you for joining today and that maybe you can hear the opening on the recording.

So we have the recording and we'll put it online. We'll rerecord the opening and have it online for everybody, including the forward-looking statements.

Thank you.

Thank you.